Ambac may stretch payments for 9 years under Wisconsin insurance plan

Ambac Assurance Corp. may delay payouts on policies insuring $50 billion of residential mortgage-backed securities under a plan unveiled by Wisconsin’s insurance commissioner. The plan to restructure the portfolio of policies, filed today in state court in Madison, will pay 25% of claims now, and the balance over the next nine years at 5.1% interest, Insurance Commissioner Sean Dilweg said. Judge William D. Johnston would have to approve the department’s proposed terms. “The plan of rehabilitation maximizes claims-paying resources, limits damage to policyholders and provides a clear framework to address claims in an orderly and reasonable manner,” Dilweg said in a statement. Ambac Assurance is the Wisconsin-based bond insurance unit of Ambac Financial Group Inc., based in New York. It was the second-largest bond insurer before the onset of the credit crisis.

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